Condo construction: One of three bills to boost affordable housing moves forward

Update: Of three bills aimed at addressing the dearth of condo construction in the metro area, only one still survives. That bill, Senate Bill 220, would push homeowners and builders toward arbitration rather than litigation in cases where the homeowners' units suffer from construction defects. State Senator Jessie Ulibarri introduced Senate Bill 220 last week, along with two other bills. Both of those bills were quickly voted down, but Senate Bill 220 survived the Senate Committee on State, Veteran and Military Affairs on Monday in a 3-to-2 vote. The bill now moves to the Senate Judiciary Committee, though Ulibarri says that given the late timing -- the legislative session ends tomorrow night -- there's no chance that it will become law this year.

For more on Ulibarri's bills, read our original post below.

Original post, May 2, 12:50 p.m.: Three bills aimed at addressing the dearth of condo construction in the metro area -- one of which has already been killed -- were introduced this week by state Senator Jessie Ulibarri, along with other lawmakers. The issue, Ulibarri says, is that expensive construction defect lawsuits are driving up the cost of building affordable multi-family, owner-occupied housing, which is bad news for working families in Ulibarri's Adams County district. It's the same issue we explored in our 2013 feature, "Design Flaw."

With just four weekdays left in the legislative session, do the remaining bills have a chance?

Senator Jessie Ulibarri.

"Time is our biggest challenge right now," says Ulibarri, a Westminster Democrat. The reason the bills were introduced so late, he says, is because he and other supporters were in "last-minute negotiations" with the lawyers who represent homeowners in construction defect lawsuits, as well as the homeowners associations themselves. Ulibarri says that even though he wasn't able to gain their support in the end, he decided he should introduce the bills anyway.

"The important thing is that we're having this conversation," he says. "Only 2 percent of housing starts in the metro area are multi-family, owner-occupied." Nationally, he says that number is 20 percent.

Here's a summary of the three bills, also on view in their entirety below. The Senate Appropriations Committee voted on Thursday to "postpone indefinitely" Senate Bill 219. More on that below.

Senate Bill 220: This bill, which was introduced on Wednesday, would do several things. For one, it would no longer allow homeowners associations alleging that their condo complexes have construction defects, such as leaky windows, to vote to skip binding arbitration and move directly to a lawsuit. If an HOA's contract with the builder specifies that disputes should be settled by arbitration, the bill would require that they follow that rule unless both parties agree that a lawsuit would be better.

The bill would also require that a majority of homeowners vote to pursue legal action, instead of just the HOA board. And before they do, they would have to be informed of all of the potential benefits and drawbacks of such an action, including that it may be difficult or impossible to refinance or sell their units while the action is pending.

Senate Bill 220 is scheduled to be heard by the Senate State, Veterans and Military Affairs Committee on Monday, May 5 at 1:30 p.m.

Senate Bill 219: This bill, which was introduced on Tuesday and killed on Thursday, would have directed the Colorado Division of Housing to study "what is causing the lack of availability of owner-occupied affordable housing in Colorado, as well as the lack of construction of this type of housing."

But at a hearing on Thursday, the seven members of the Senate Appropriations Committee weren't all convinced that such a study was needed.

"I think there's quite a bit of data out there," said Senator Pat Steadman. "The idea that we need to spend $125,000 studying something that there's a hue and cry about and a lot of evidence of a problem already, I'm sort of questioning."

The committee voted 5 to 2 to kill the bill.

Senate Bill 216: This bill, which was introduced on Monday, would create a cash fund within the Division of Housing to provide insurance premium rebates to developers that build affordable multi-family, owner-occupied housing.

Senate Bill 216 was passed by the Senate State, Veterans and Military Affairs Committee on Wednesday and is now before the full Senate.

Continue for more, including a statement from a group opposed to SB 220.

A Denver apartment building -- not a condo building -- under construction last year.

Nate Hemmert

Ulibarri says he spent months working on these bills after voting against a condo-construction bill proposed last year. That bill would have provided some legal protections to developers wanting to build condos near light-rail stations. But Ulibarri felt those protections were "very extreme" and didn't do enough to protect consumers.

"I thought the concept was right, that we needed to do something to break the logjam," he says, so he committed to working with stakeholders to find a solution that would benefit consumers as well as builders -- which he thinks Senate Bill 220 does.

Ulibarri grew up in the district he now represents, where he says there's a "high rate of poverty," and spent his first few years living in a trailer home. Because of his background, he says he recognizes the need for affordable owner-occupied housing -- and currently, there's very little of it. Builders say they won't build it because of the threat of construction defect lawsuits, which they say has also driven up the cost of insurance.

If apartments and luxury homes are the only products that builders are willing to build, it means working families will be priced out of their neighborhoods, Ulibarri says.

"That's not my vision for Adams County," he adds.

But not everyone agrees with him. On Wednesday, a group called the Build Our Homes Right Coalition, comprised of homeowners who have experienced construction defects, issued a statement against Senate Bill 220. Arbitration is more expensive than a lawsuit because the parties have to hire the arbitrator, the group claims. Plus, it argues, if the homeowners don't agree with the arbitrator's opinion, they can't appeal it.

"The reality is that Colorado's construction defect laws aren't the cause of lawsuits --shoddy construction and bad workmanship are the cause," Mary Lavia, a Denver homeowner who has experienced construction defects in her new condo, said in a statement. "Those laws are there to protect consumers from home builders who cut corners and refuse to make adequate repairs.

"The result of Senate Bill 220 will be more poorly constructed condos and houses with more defects, because forcing homeowners into binding arbitration means home builders will have less incentive to build with quality in the first place."

This year's legislative session is scheduled to end on Wednesday, May 7.